Participation In A Foreign Pension Plan

Form 8938 (Statement of Foreign Financial Assets), introduced in 2011 as part of the Foreign Account Tax Compliance Act (FATCA), requires taxpayers to report their foreign assets, subject to minimum values, and indicate where the related income is picked up on their tax return.  

One asset often misunderstood and likely overlooked in many cases is a taxpayer's interest in a foreign pension plan. Foreign nationals who move to the United States or U.S. citizens who have spent significant time overseas are likely to have some form of foreign pension arrangement.

In many cases, there is uncertainty as to the reporting requirements and the application of U.S. tax rules and/or tax treaties to such plans but, in general, for senior level participants it is likely that employer contributions will be taxable as compensation and the growth in the value of the pension will create taxable income annually. Furthermore, the plan will generally need to be reported by the taxpayer